The Financial Times' annual Wine Investment Report was published today. Jancis' Robinson's lead article, Asia gives the market a new flavour (or see this link to read a longer version on her site), provides a superb overview of global market changes.
As noted in my quote in the article, I firmly believe that being in the fine wine business requires a presence in major economic markets -- that now means Asia.
Tangible evidence that markets are constantly changing
Consider this quote from Jancis' article: "Last year, more than $233 million worth of fine wine went under the hammer in the U.S., as opposed to not much more than $35 million in the UK." There was a time when these relative percentages were reversed.
Why did UK fine wine traders (other than auction houses) never expand into the U.S.?
While the U.S. is a large fine wine market, the state-based regulatory environment and direct shipping laws likely seem daunting. While many UK players serve the U.S. market remotely, only Bordeaux Wine Investment (through its sister company, Bordeaux Wine Locators) has U.S. operations.
Why aren't more U.S. companies expanding into Asia now?
Other than Vinfolio and Acker Merrall, I'm not aware of other U.S. fine wine companies launching operations in Asia. A few reasons come to mind:
- The U.S. is a huge market in its own right. Most firms have not exploited the opportunities on their doorstep, partly due to antiquated direct shipping laws that limit interstate sales.
- Many U.S. firms are family-run and under-capitalized. Most started as bricks-and-mortar businesses serving a fairly local community of customers. Their next big step is moving online to at least address a national marketplace before going international.
- Running a global business is more complicated, and therefore, harder to do successfully.
How will fine wine retailing in Asia evolve?
The market (including in Hong Kong) is still in an early stage of evolution and is fundamentally "up for grabs." The keys to success are:
- Having access to the right supply of fine wine at competitive prices.
- Ensuring that the quality of the wine is preserved through appropriate shipping, handling, and storage.
- Providing a high level of service (hence our own guiding principle, "Fine wine. Finer service").
Why will many Asian consumers storing their fine wine in London (or the U.S.) prefer Hong Kong?
- Having your wine closer to where you live is comforting to many wine collectors who often feel emotionally attached to wine which they may have painstakingly acquired.
- Proximity also means quicker access when you want your wine. Air freight is expensive and not as safe a means of transferring wine from the UK/U.S. as refrigerated containers (by boat).
- For Hong Kong-based wine collectors, even the modest risk that wine duties could be reinstated in the future argues for bringing wine back to Hong Kong while the duty is zero.
- Climate-controlled, secure storage environments are replicable almost anywhere.
- Future sales of investment-grade wines will increasingly be made within Asia (just as they have already shifted to the U.S. from London).
Vinfolio's Hong Kong storage facility
As noted before, we are actively engaged in taking steps to open a Hong Kong-based wine storage facility, both for local storage of our own retail inventory as well as to provide full-service wine storage to others. If you're interested in registering your interest in our Hong Kong storage, please email us at service@vinfolio.com (make sure to mention your estimated quantity of cases to store). I also be in Hong Kong for the week of May 26th and would be glad to meet interested parties subject to my schedule.
